140. But I am still left slightly in the dark
as to exactly what regulatory framework you would like.
(Ms Taylor) What we would like is clarity as regards
the role that Ofwat should play, clarity as regards the DWI and
clarity as regards the Environment Agency. What we would like
is not for all of them to have the same responsibilities; we would
like clarity as regards their separate responsibilities, so that
Environment Agency is concerned with the environment; Ofwat is
concerned with economic regulation and so on. What we would then
like is a responsibility for DETR to bring those togetherto
hold the ring, if you like, publicly. What we do not want to see
is regulators

141. Do you want the Secretary of State to be
the Regulator?
(Ms Taylor) No, what we want is the Secretary of State
who, after all, is elected

142. But you want the Secretary of State to
bring together those competing responsibilities?
(Ms Taylor) Exactly. We want those competing responsibilities
to be brought together in the open in such a way that everybody
who has an interest in waterand that has to be the citizens
of the UKcan see what is being done. So that is why we
would like the ring to be held by the DETR. We would like them
to take that responsibility.

143. How?
(Ms Golay) Where we would like the Secretary of State's
intervention is where there are conflicting objectives. Obviously
there are areas where the Environment Agency and Ofwat each pursue
their objectives and do not impinge on each other's and so forth.
That is not where we think the Secretary of State's intervention
is required but when the sustainability of the activities of the
water industry do bring into conflict the environmental, economic
and social objectives, then choices and trade-offs have to be
made. It is at this stage that we think the Secretary of State
needs to intervene because those choices are choices rightly made
by political processes. What we have called for, and we are not
saying it is a definitive world, is for industry-wide debate that
would be led by the DETR and we think that could take place through
a forum. Now, we have had examples of ad hoc summits that this
government called on water and on leakage. We think that those
two ad hoc summits might be the precursors for a continuing forum
that would exist to debate those issues openly, consult all the
stakeholders involvedwhich would typically include not
just consumer representatives but also environmental pressure
groups and also other users of water in this countryand
through that forum, through that open process, those views from
the stakeholders could be made clear and debated in the open,
with the eventual outcome being accepted trade-offs between the
various objectives of environmental, economic and social sustainability.

144. What seems to strike me is that what sits
behind your suggestions here is an intention to curtail the independence
of the regulators?
(Ms Taylor) I do not think that is what we are saying.
What we are saying is that the responsibilities of the regulators
should be absolutely clear but that the process, the bringing
together, the understandable conflicts there are between the regulatorsand
they are perfectly understandableand the responsibility
for those should be DETR's, and that that process should be open
and transparent so that all the stakeholders involved can see
how that is happening. What we want to get away from is a periodic
review being a five-year battleground, where you ask, "Is
environment going to win this time?"; "Will customers"so-called"win
the next?"; "How will industry get on battling away
with the regulators?". That is not desirable. What we need
is long-term planning for the future of the water industry involving
all the stakeholders in saying what those long-term goals should
be; then we see more of the periodic review as being a five-year
review of how we are getting towards those long-term goals. With
more openness we believe that will be far better but what we are
not saying is that we want to curtail the responsibilities of
the regulators because, as far as we are concerned, strong and
respected regulators are very importantnot just to us but
to everybody and to all of our stakeholders.

145. Which of those qualities did Ian Byatt
not meet?
(Ms Taylor) I think one of the qualities perhaps was
a willingness to sit down and to discuss long-term but merely
to keep those views and opinions perhaps to himself far too much.
Certainly we have seen a change already as regards Ofwat with
Philip Fletcher and also as regards the Environment Agency with
a new chief executive and a new chairman. We are already beginning
to see a change and that is why we feel that this draft Bill is
such an opportunity to take matters forward based on, if you like,
a great deal of goodwill to try and get it out. People are less
and less saying, "This is my area, I am protecting this,
I am not willing to discuss it".

Chairman: You are saying it is a great opportunity
but you are not giving us very much clarity as to how you want
the legislation changed to make that happen.

Mr Blunt

146. Does the Bill as it is currently drafted
give you the clarity you want?
(Ms Golay) No.
(Ms Taylor) No.
(Ms Golay) It does not and, in effect, it contains
a proposal to which we objected because we think it makes the
matter less clear even than now, which is a proposal to give Ofwat
or the Director General guidance to which he would have regard
concerning a number of new social and environmental objectives,
and we understand that is the way the Bill would be giving the
Director General not just an economic set of duties but a sustainable
objective, and we think this is not the way to improve clarity.
We believe it would be better if we had some clear objectives
set in statute, as they are now or are proposed to be altered,
for each of the regulators and that the Bill should also propose
that there is a mechanism whereby, when those objectives conflict,
the resolution is led by DETR through an open debate. That provision
we think should be added to the Bill. In passing, one of the issues
with the periodic review just completed was that there was no
mechanism, either statutory or informal, whereby the various industry
regulators could meet and discuss the resolution of the problems
and the conflicting objectives they had. It had been tried in
the past under the aegis of the DETR but it did not function in
practice on this occasion, so the institutions that would have
supported a resolution of the conflicts involved in the regulation
and in the periodic review when it is finished were not put in
place, and we are suggesting they should be.

147. Do you have specific suggestions in terms
of amendments that should be made to the Bill to put this right?
(Ms Golay) If you would like specific clauses written
down we could submit them to you.

Chairman: That would be very helpful.

Mr Blunt

148. Finally, touching on the Water Advisory
Panel, what do you think its role should be and should environmental
representatives be included on the panel?
(Ms Taylor) We rather like the idea of the Water Advisory
Panel. We would like to see it publish its advice to the Regulator
and there is nothing about that in the Bill, so we would like
to see that. As regards what it should be responsible for, again
we are interested in the clarity as regards the individual regulators
and the responsibilities that they should have so we would see
the Water Advisory Panel having that same kind of clarity.

Mr Olner

149. You mentioned stakeholders earlier, and
it is a term you have used throughout the answers you have been
giving to my colleague. How would you rank those stakeholders?
(Ms Taylor) I do not think we would dare rank them

150. So it is not shareholder first, business
customer second, domestic third?
(Ms Taylor) No because, as regards Water UK we represent
the public authorities in Scotland and Northern Ireland as well
so, in terms of shareholders, if you look at our business planand
this may be a failing on our partthe word "shareholders"
does not appear. As far as we are concerned, the kind of stakeholders
that we have in mind would be environmental, consumer and so on.
Those are the kind of people we work with and, indeed, when we
were planning our submission to you, we called a meeting of all
our stakeholders and talked through with them the kinds of ideas
that we were intending to put forward.

151. So your shareholders are quite happy to
take a long-term view on the industry? They are not looking for
a quick return?
(Ms Taylor) That is absolutely essential because the
water industry has to be a long-term industry.

152. And you are convinced that you can attract
money from the city to pursue that?
(Ms Taylor) I am not in the business of attracting
money from the city. Some of my members arenot all.

153. Most of the major players are?
(Ms Taylor) What anybody wants, however, is to have
that kind of clarity as regards long-term and the way forward
and traditionally, the water industry has, in fact, attracted
investors who are interested in long-term investment. It has not
traditionally wanted to be in the volatile end of the investment
market, if you like. We have seen that recently at the moment
and that has been detrimental to the companies, as far as they
are concerned. So yes, we are looking for long-term and clarity.

154. Why are you opposed to the Director General
of Ofwat having a duty regarding sustainable development?
(Ms Taylor) What we want to see is each of the regulators
having their individual responsibilities so there is absolute
clarity where they are coming from. What we want to avoid is a
sort of environmental Ofwat which would then go into a corner
on its own and come out with a decision at the end of it and say,
"Well, we have weighed up the balance and looked at customer
demands and environmental demands, and here is the answer".
We do not think that is right. We think that would cut across
the responsibilities of the Environment Agency. We believe Ofwat
should have its responsibilities; the Environment Agency should
have its responsibilities

155. They have already got them?
(Ms Taylor) Yesand what we then want is for
DETR to grasp its responsibilities more enthusiastically than,
maybe, it has in the past and to bring them together, and, where
there is conflict, to resolve that in an open and transparent
way, so that all our stakeholders can understand.

156. You mentioned demand. Do you think and
do you agree with the Wildlife Trust that the Bill is missing
the opportunity to promote demand management?
(Mr Pocock) I think you need to bear in mind that
demand management has two tracks agreed by both industry and government.
On the one hand it is about resource development coupled with
demand management in terms of the leakage and water efficiency
measures. The industry has made significant gains and improvements
in leakage to the point at which we are achieving largely economic
leakage levels.

157. But you only addressed the question of
leakage when this Committee issued a scathing report on leakage,
and we had the summit that you referred to on leakage. You were
dragged kicking and screaming to address the issue of leakage?
(Ms Taylor) I would say that is, sort of, fair comment.
That was before Water UK was set up and as far as we are concerned
we are here, as I said, to work constructively and openly with
you and our other stakeholders and I think the view you put forward
is a perfectly acceptable viewit may not be everybody'sand
I certainly would not want to argue with you about that. As far
as demand management is concerned, however, the industry has a
responsibility under the 1995 Environment Act to pursue demand
management. That is statutory for it to do, so we think that further
legislation is not needed. That happens to be our view and that
is why we have not been pressing for further legislation in this
draft Bill.

158. Would you welcome company's specific targets
for domestic water use?
(Mr Pocock) This is a very difficult area. In particular,
when we still have a long way to go in understanding the full
robustness of demand management in water efficiency measures in
terms of sustainability. The industry has made great strides forward
and is working together with people like the Environment Agency
to understand that long-term benefit, and until we can be sure
that water efficiency and demand management measures can be as
equitable as water resource measures, I think it is premature
to be moving towards targets. I think we still have some work
to do and we are very keen to do that and work with others to
achieve that and put it into a very robust setting.

159. But how will your stakeholders then be
able to have proper comparisons as to whether you are delivering
what you intend to? If you have not got a target, it is meaningless.
(Mr Pocock) It would be helpful if we looked forward
to the point at which we can understand those targets in a robust
manner. At the moment those targets may not be founded on a reliable
basis. We need to understand that reliability and, therefore,
I think at this stage it might be too early. At the same time,
once we have achieved that, then that can be reconsidered but
it is important that we do not lose sight of the importance of
developing resources as well.